Spare Capacity

Over the past few years you might have heard the term “sharing economy” being thrown around. Which is a more consumer friendly term for monetizing underutilized fixed assets. This is different from an eBay where you have an old phone which you want to sell and they provide the marketplace to find a buyer for it. It’s also different from Elance where you are offering your professional services to people looking for those skills. Personally I like the term spare capacity over “sharing economy” because that’s really what it is.

The startup that kicked off the “sharing economy” revolution was Airbnb in 2008 at the height of the financial crisis. Airbnb is a website that provides lodging but not using the traditional method of hotel rooms. Instead it rents out the spare capacity that an individual has such as a room, apartment, condo, house, etc… to people looking for lodging. The timing couldn’t have been better, the financial markets were in a downward spiral and people were looking for a cheaper lodging alternative and the owners of these fixed asset were looking for a way to make some money on the side.

Since then there has been an explosion in services to help people generate cash from what they own. For the taxi/cab sector there is Uber, Getaround and Lyft to name a few. The initial concept for Uber, which started in 2009, was to allow anyone with an iPhone to hail a black sedan (a generic term used to refer to the Lincoln Town Car, Cadillac Escalade, etc…). The idea was that many of these black sedans were just sitting around and waiting for their next scheduled pickup. With Uber the drivers could get connected to a system of people looking for black sedans and monetize their spare time and their car.

What really got me thinking about spare capacity is when I had a chance to listen to Aaron Hirschhorn of DogVacay. DogVacay is like “Airbnb for dogs”, it allows you to find a host family for your dog while you go on vacation for a couple days or couple weeks. That’s a great way for someone to make money on the side that loves dogs and has a house or apartment to host the dog.

The initial title of this blog post was “Boosting the Economy via Spare Capacity” which is correct but I decided to nix the title. But the premise still holds true, you can wait for the economy to turn around or work with what you have. Which explains why so many of these businesses started around the time of the financial crisis, they were ripe for people wanting to do something right now.

India is so ripe for exploiting this spare capacity. I was reading a report about transport trucks and 80% of the owners have less than 5 trucks. Which means the market is highly fragmented and an opportunity to monetize the return leg (backhaul) of the journey. The freight carriers know how to go from point A to point B, but at point B is where the could use a technology enabled spare capacity solution.

The one I always talk about is the spare capacity with my car and driver. I have a driver who takes me to the office and for most of the day he just sits around doing nothing. This is not unique to me, there are many people in the same boat as me. Of course, there are critics who say it will never work because people don’t want to rent out their car. I would argue the same thing could have been said about Airbnb when it started, “people will never give out their homes or apartments for nightly rentals…”. However the stats speak for themselves – Hilton Hotels has around 200,000 room nights in their inventory and Airbnb is already booking more room nights then the largest hotel chain in the world.